Why do people complain about CEO compensation? (1 Viewer)

[Politician Spock]

The more CEOs are paid, the worse the firm does over the next three years, as far as stock performance and even accounting performance

This is why I think CEO's of publicly traded companies should make $1 in salary, and their compensation should be only from increasing the stock price (and not the earning of more shares), like a business owner.

This used to be common. But this was back in the day when people would directly own stocks and take a vested interest in their stocks voting power. Now most stock is indirectly owned through mutual funds... which in my opinion is a big reason why CEO's have begun to rape their own companies, as the accountability is gone. The only ones who can hold the CEO's accountable for this anymore are people who are hoping to one day be a CEO too.

 

[djmich]

PS — successful white male checking in.  I’d love to be able to put all the credit of my successes on my brilliance and amazing work ethic.  The reality is, as a white guy who grew up in a middle class household, I had boatloads of advantages over lots of other folks.  And a black kid from the ghetto, for a variety of reasons, some complicated and some not, were never on a level playing field with me.  Hell, a black kid from the middle class wasn’t on a level playing field with me.

That said, things have changed.  In the current workforce, diverse candidates are unicorns.  It’s a huge emphasis.  We push harder to recruit them.  We push harder to advance them. Our clients demand it and the business demands it.  Sitting here today, and I’ve seen this in managing in a corporate environment, when comparing an equally talented back woman and white man, the black woman will get a huge leg up.  And if she’s not given all the opportunities she wants, she can move on to the next place and get those opportunities.  I’m not complaining about that—I think it’s the right thing to do.  It’s the right thing to do to correct for centuries of history.  But my point is that I think in 10 or 20 or 30 years, this won’t be an issue anymore.   

And BTW, I’m a guy who 10 years ago thought all this diversity stuff was BS.  I’ve learned. 

Agree with your first statement around advantages.

With regard to the bolded, I think that is more controversial.  Is it the right thing to do to give a black woman a huge leg up over a white male when applying for the same job with the same credentials?  If it helps the business more, which I would agree it generally does because of the benefits of diversity (both internal and external), then thats ok in my view although I hope you are right about the 20-30years not an issue anymore.

Purposefully giving huge advantages to one individual over another (particularly where both individuals clearly had life advantages if they are applying for senior corporate roles)...I just don't think that's right and its presumptuous.  Presumptions which because of the great progress we've made are thankfully becoming more and more wrong and cannot be validated without frankly asking inappropriate questions. 

 

[djmich]

CEO behaviour in public companies bothers me more than pay. 

1. Focusing on the quarter at the expense of the business 

2. Cutting costs/doing layoffs when they are making these sick payouts. Would love to have a CEO sacrifice $1M to save “X” number of jobs for his company, to better serve his customers. 

Blame shareholders for the quarterly focus.

 

[Otis]

Agree with your first statement around advantages.

With regard to the bolded, I think that is more controversial.  Is it the right thing to do to give a black woman a huge leg up over a white male when applying for the same job with the same credentials?  If it helps the business more, which I would agree it generally does because of the benefits of diversity (both internal and external), then thats ok in my view although I hope you are right about the 20-30years not an issue anymore.

Purposefully giving huge advantages to one individual over another (particularly where both individuals clearly had life advantages if they are applying for senior corporate roles)...I just don't think that's right and presumptuous.  Presumptions which because of the great progress we've made are thankfully becoming more and more wrong and cannot be validated without frankly asking inappropriate questions. 

Fair point. I have a problem with this too on some level. What about the white male who is more deserving on the merits?  Why should he be penalized for something some ##### strangers did 200 years ago and which he thinks was wrong?  It’s a hard problem. And I suppose there will have to be a few casualties along the way to right the ship. 

 

[AAABatteries]

CEO behaviour in public companies bothers me more than pay. 

1. Focusing on the quarter at the expense of the business 

2. Cutting costs/doing layoffs when they are making these sick payouts. Would love to have a CEO sacrifice $1M to save “X” number of jobs for his company, to better serve his customers. 

Yep.

 

[djmich]

On CEO pay, its crazy high, particularly when you get to fortune 500.  As others have pointed out wage acceleration is nuts too for entertainers and professional athletes.  I think the parallels there, athletes for instance, are real and are actually more easy to digest because of the ease of transparency in say baseball with statistics like batting average, etc.

Wheres the outrage that Mike Trout should be donating some of his new contract to the stadium peanut tossers (Based on comp he makes the most in the organization so I'll parallel him to the CEO).

Wheres the outrage given the Angels have only made the playoffs once during his career and when they did he did squat.  How is that any different than a CEO at a company that has done poorly.  Should Trout not have been given his new contract.

The idea that in general CEO's can easily be replaced by people making half of much is half-assed thought when looking at a compnay's win-loss record and saying hey look they're paying him a boatload and they still suck.  See:  Trout and the Angels.

Some CEO's are overpaid.  Albert Pujols was overpaid the day he got his new agreement.  It happens in baseball, in entertainment and business.  Mistakes are made, it doesn't mean that the price to get the chance to get the talent that can help you win (the bet the Angels are making on Trout) is not right and that the compensation required to make that bet is not right.  In both instances I'd say fair market has set it and that's the best way.

 

[Pipes]

This is why I think CEO's of publicly traded companies should make $1 in salary, and their compensation should be only from increasing the stock price (and not the earning of more shares), like a business owner.

This used to be common. But this was back in the day when people would directly own stocks and take a vested interest in their stocks voting power. Now most stock is indirectly owned through mutual funds... which in my opinion is a big reason why CEO's have begun to rape their own companies, as the accountability is gone. The only ones who can hold the CEO's accountable for this anymore are people who are hoping to one day be a CEO too.

This is a bit extreme.  Plenty of external factors beyond a CEOs control that could negatively impact a CEOs salary despite him/her doing an outstanding job.  

 

[Politician Spock]

This is a bit extreme.  Plenty of external factors beyond a CEOs control that could negatively impact a CEOs salary despite him/her doing an outstanding job.  

That's the risk of being a business owner. CEO's being isolated from those risks is a big part of the problem. 

 

[shadrap]

One out of three.

House was incredibly unstable due to alcoholic mom.  Her dad, mom, sister and brother were also alcoholics.  I chose to not become one.

I was on my own at 17.5 .   No resources other than being a busboy and a boxboy to pay for college/rent/food. Another choice I made.  These created better opportunities down the road.

I am very lucky, and have always been extremely grateful that I live in a country that allows me to make choices and choose a better path if that's what i desire.  I wake up almost everyday with my first intentional thought  being thankful for what I have.  I have had a lot of advantages that others don't/didn't have.  I get that. I still had to make choices to make the most of those advantages.

I'm extremely grateful to be able to give back at this point in my life. My RE biz is built around that concept as I help hard working, first time home owners get ahead in this life financially.

 

really cool.

 

[shadrap]

Yep.

yep.

 

[shadrap]

Less than 10 people saw the 2008 housing crash that sub prime mortgages were not going to be paid back.  think about that.  These are the supposedly  gifted money gurus.  These so called wizards cost us taxpayers a couple of trillion give or take.  Too big to fail?  give me a break.  & we bail them out?   Holy mamma-something is wrong here.

yes, I'm still pissed off.

 

[-OZ-]

Blame shareholders for the quarterly focus.

While true, in the big picture that's almost all of us.

 

[-OZ-]

Less than 10 people saw the 2008 housing crash that sub prime mortgages were not going to be paid back.  think about that.  These are the supposedly  gifted money gurus.  These so called wizards cost us taxpayers a couple of trillion give or take.  Too big to fail?  give me a break.  & we bail them out?   Holy mamma-something is wrong here.

yes, I'm still pissed off.

This I agree with

Make as much money as you legally can, but accept the risk

 

[Alex P Keaton]

While true, in the big picture that's almost all of us.

Sure.  But in practice, it's really institutional investors.

 

[Insomniac]

From my long ago days as an economics major (I switched majors after 2 years) I recall that the purpose of a firm is to maximize profits for the owners of the firm and that wages are a function of marginal revenue produced.

There's no doubt that some CEOs made/make an enormous difference for profits, for instance Steve Jobs at Apple. OTOH there are plenty of medicre or bad CEOs but they make big money too, say Carly Fiorona at HP. Perhaps we can steal a baseball analytics term and judge CEO performance based on Value Over Replacement Level CEO. There have to be thousands of guys that went to top MBA schools and have 20+ years of experience that could do about as good a job, maybe better than the bottom third CEOs of the Fortune 500 companies for less money.

 

[djmich]

While true, in the big picture that's almost all of us.

Exactly

 

[Ilov80s]

Less than 10 people saw the 2008 housing crash that sub prime mortgages were not going to be paid back.  think about that.  These are the supposedly  gifted money gurus.  These so called wizards cost us taxpayers a couple of trillion give or take.  Too big to fail?  give me a break.  & we bail them out?   Holy mamma-something is wrong here.

yes, I'm still pissed off.

And some of the worst ones (Not specifically CEOs) actually bet on the crash happening, cleaned up and used that money to buy assets on the cheap. Disgusting profiteers.

 

[Despyzer]

Based on the information available in this thread, it seems like it should be re-named "Why don't MORE people complain about CEO compensation?"

 

[Ilov80s]

On CEO pay, its crazy high, particularly when you get to fortune 500.  As others have pointed out wage acceleration is nuts too for entertainers and professional athletes.  I think the parallels there, athletes for instance, are real and are actually more easy to digest because of the ease of transparency in say baseball with statistics like batting average, etc.

Wheres the outrage that Mike Trout should be donating some of his new contract to the stadium peanut tossers (Based on comp he makes the most in the organization so I'll parallel him to the CEO).

Wheres the outrage given the Angels have only made the playoffs once during his career and when they did he did squat.  How is that any different than a CEO at a company that has done poorly.  Should Trout not have been given his new contract.

The idea that in general CEO's can easily be replaced by people making half of much is half-assed thought when looking at a compnay's win-loss record and saying hey look they're paying him a boatload and they still suck.  See:  Trout and the Angels.

Some CEO's are overpaid.  Albert Pujols was overpaid the day he got his new agreement.  It happens in baseball, in entertainment and business.  Mistakes are made, it doesn't mean that the price to get the chance to get the talent that can help you win (the bet the Angels are making on Trout) is not right and that the compensation required to make that bet is not right.  In both instances I'd say fair market has set it and that's the best way.

I still don’t think the CEO to athlete comp makes sense. Trout and Pujols are the product. People buy their ticket to see them play. Nobody tunes into Game of Thrones because Richard Plepler is the CEO of HBO. Paying $100 million for a player is more akin to a company investing in their product- say HBO rolling out a new season of Thrones or Ford redesigning their car audio or Coke putting out a new ad campaign. The President/owner/GMs of the Angels or Lions or whatever are more in line with a CEO in terms of their responsibility. 

 

[djmich]

Yah, different professions so not a perfect comp, but I think similar in many ways.

Trout, Pujols and CEO's are hired because the owners, and/or their proxies, believe they are a good investment to drive company returns.

Trout, Pujols and CEO's get paid a #### ton because they have a track record that commands it.

Trout, Pujols and CEO's get paid regardless of outcome.  CEO's are actually more invested in the outcome in that much of their income is stock based (team performance) driven.

You pay to get the best chance you can to win.   

 

[Ilov80s]

 I still don’t think it makes sense to compare unionized athletes to cooperate execute officers. I get there are some similarities but there are far more difference imo.

 

[Pipes]

That's the risk of being a business owner. CEO's being isolated from those risks is a big part of the problem. 

I agree with this but $1 salary no way is that remotely realistic.